The US Economy after September 11th. Decline or Rapid Growth? (Экономика США после 11-ого сентября. Снижение или Быстрый Рост?) — страница 2

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were among those suffering big losses. ''Companies are in survival mode and they are cutting jobs to control costs,'' said economist Ken Mayland of ClearView Economics. ''The tragic events of September 11th and their aftermath probably tipped the economy into recession. People are waiting for the other shoe to drop.'' There is one more indirect evidence of the tough state of staff policy in American companies: many of them are planning to cancel traditional Christmas Parties due to their poor financial condition. Thus, according to the GDP report of the government, the economy contracted in the third quarter. Even with a mild recession in America, then, this could still turn out to be the most severe world recession since the 1930s. (Such a recession is commonly defined as annual

growth of less than 2%.) Global growth is predicted to be average 1.5% in 2001 and 2002, its slowest two-year period during the past 50 years. This increases the risks for America, because contracting trade can amplify a recession. Last year the volume of world trade grew by 13%, this year growth may fall to zero. When nominal GDP growth falls so low, central banks have less scope to use monetary policy to boost demand, profits grow more slowly than expected by stockmarket investors, borrowers find it harder to repay debts. There is also one factor, which some specialists consider to be one more evidence of weakening economy: profits of confectionery companies grew this year by 15%. Statistics say that this is often an indication of recession, as many people can’t satisfy their

luxury wants any more, but consuming larger amounts of sweets, which are comparatively cheaper. In addition with the wide-spread view that the country has entered its first recession in a decade, analysts are predicting that inflation pressures, which have been moderating for a year, will retreat further, especially in the area of wage pressures, as the surging unemployment rate dampens workers' demands for salary increases. Economists are afraid of that continued fallout from the attacks, worries about anthrax in the mail, tumbling consumer confidence and rising unemployment, will keep consumers tightfisting, further weakening the economy. But let us now switch to the more optimistic prediction as many economists still reckon that America's recession will be brief and mild. They

predict that GDP of the USA will decline till the second quarter of the year 2002, then will start to recover with quite a strong growth, by 3-4%. If the prognosis turns out to be right, it will be one of the shortest and mildest recessions on record. And there are three main reasons to believe in it: 1.     It is argued that firms have already made steps to cut back unwanted inventories and overcapacity. 2.     In contrast with three previous recessions, oil price has fallen. 3.     America benefits much from monetary and fiscal policy. Interest rates have been cut ten times this year, including three reductions after September 11th, to their lowest level since the early 1960’s. President Bush, meanwhile, wants

Congress to quickly pass a package aimed at stimulating the economy through new tax cuts, increased government spending, emergency relief, which could amount to 1.5% GDP – the biggest fiscal boost in one year since 1975. Indeed, the US economy had an advance in October, largely thanks to zero interest-rate financing for new cars. The value of retail sales climbed by 7.1%, the biggest increase ever. Sadly, retail sales dropped back next month, as the effects of the incentives ran out. But even not taking into account cars, retails sales rose by 1% in October. Besides also in October the US dollar reached a 3-month high against the Euro due to new hopes for a revival of consumer demand. The hope that America's recession will be mild appears to have helped share prices to recover

worldwide. Many stockmarkets have almost regained their levels on September 10th. Main indexes - Nasdaq, S&P 500, DJIA - are edging up, though in comparison with December 31st, 2000 they are respectively 23%, 13.6% and 8.9% lower. Considering Commodity Price index change on October and on the whole year we face practically the same situation: change of Industrials index on one year is -15.7% and on one month +2.7%, change of Food index -2.7% and +3.0% respectively. The same applies to other commodities as well as for all items. This might signify that gradual boosting of the Economy in the last quarter of this year and in 2002 will compensate for the sharp slump in September and the recession will be left behind. As for me I believe in the USA. There is one common feature of